Choosing a Good Real Estate Investment

What is a good real estate investment? First determine what your personal objectives are. Income, growth, utility, convenience, prestige or whatever. Remember real estate does not usually lend itself to short term, fast turnover. Real Estate is a “lumpy” asset. Buying costs, financing, upkeep and selling costs must all be considered carefully. Property and income insurance are a must.

I will not cover the choice between commercial/industrial property and residential property other than to say that commercial returns are usually better and the leases are longer but vacancies are often harder to fill.

If your choice is residential, then the convenience factor is often critical. Is the property located such that you can visit and inspect should repairs be required? Can you drive by to keep an eye on it?

I would avoid anything NEW. Include all the usual things in your selection criteria, paying particular attention to the location, facilities and growth prospects. If you have chosen well for your principal residence and enjoy the locale, try buying in the same area. It might be useful in the future if family or friends wish to move into your area. If you have been in your local area for a good while, you should know what represents good value. You save on research because you are already in touch with all of the information that you require. You might buy something that you would be happy to occupy. This approach gives you the option of selling your principal place of residence OR your investment property if financial or other reasons dictate. I have been in a situation where one of my children made an excellent tenant in a nearby property.

Usually, I would avoid “hot spot” purchases as houses in these areas often over run the market and you might well pay way too much. I avoid new property because tenants can make it “old” very fast.

Never forget that the major growth component in any property is the LAND! Paying for new property that is going to be held for a long time seems to be a waste of time. In twenty years purchasers won’t care whether the property is twenty years old or thirty years old. They will want to renovate or re-build anyway.

Avoid the temptation to buy in holiday areas that you visit. Remember that you are visiting in holiday mood, in holiday season and prices are often pumped up because there are many others doing the same thing.